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ISSN 2056-4856 (Print)
ISSN 2056-4864 (Online)
WATERLAT-GOBACIT NETWORK
WORKING PAPERS
Research Project Series — SPIPRW
PRINWASS Project
Working Paper Vol. 3, No 3
An examination of the politics of privatization of water and
sanitation services
in Africa, Europe, and Latin America (1990-2004)
Newcastle upon Tyne and Mexico City, June 2016
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WATERLAT-GOBACIT Network Working Papers Research Projects Series
SPIPRW – PRINWASS Project – Vol. 3 No 2 Castro, José Esteban
_____________________________________________________________________________
WATERLAT-GOBACIT Research Network
5th Floor Claremont Bridge Building, NE1 7RU Newcastle upon
Tyne, United Kingdom E-mail: [email protected] – Web page:
www.waterlat.org
Pagei
Cover pictures: Left: Zir, drinking water container left by
people outside their homes to offer free water to thirsty passers
by. Ancient cultural habit still practiced in Middle Eastern and
North African countries. Cairo, Egypt, 2004. Source:
WATERLAT-GOBACIT Flickr collection (Attribution-NonCommercial
Creative Commons) Middle: A public monument representing the joy of
free drinking water, Barcelona, Spain. Source: WATERLAT-GOBACIT
Flickr collection (Attribution-NonCommercial Creative Commons)
Upper right: Anti-privatisation campaign: popular referendum on
water privatization, Madrid, Spain, 2 April 2003. Source: Campaign
website. Lower right: Anti-privatisation campaign: popular
referendum on water privatization, Italy, 2011. Source: Campaign
website. Back Cover picture: Members of the PRINWASS Research Team
at the Final Project Meeting, University of Oxford, Oxford, UK, 30
June -1 July 2004. Source: WATERLAT-GOBACIT Flickr collection
(Attribution-NonCommercial Creative Commons)
mailto:[email protected]://www.waterlat.org/https://flic.kr/p/J79yyAhttps://flic.kr/p/J79yuChttp://www.transition-europe.org/?p=464https://flic.kr/p/nWyifz
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WATERLAT-GOBACIT Network Working Papers Research Projects Series
SPIPRW – PRINWASS Project – Vol. 3 No 2 Castro, José Esteban
_____________________________________________________________________________
WATERLAT-GOBACIT Research Network
5th Floor Claremont Bridge Building, NE1 7RU Newcastle upon
Tyne, United Kingdom E-mail: [email protected] – Web page:
www.waterlat.org
Pageii
ISSN 2056-4856 (Print) ISSN 2056-4864 (Online)
WATERLAT-GOBACIT NETWORK WORKING PAPERS
Research Projects Series SPIPRW PRINWASS Project
Working Paper Vol. 3 No 3
An examination of the politics of privatization of water and
sanitation services in Africa, Europe, and Latin America
(1990-2004)
José Esteban Castro Newcastle University
Newcastle upon Tyne, UK June 2016
mailto:[email protected]://www.waterlat.org/
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WATERLAT-GOBACIT Network Working Papers Research Projects Series
SPIPRW – PRINWASS Project – Vol. 3 No 2 Castro, José Esteban
_____________________________________________________________________________
WATERLAT-GOBACIT Research Network
5th Floor Claremont Bridge Building, NE1 7RU Newcastle upon
Tyne, United Kingdom E-mail: [email protected] – Web page:
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Pageiii
WATERLAT-GOBACIT Network Editorial Commission Alex Ricardo
Caldera Ortega, University of Guanajuato, Campus Leon, Leon,
Guanajuato, Mexico. José Esteban Castro, Newcastle University,
United Kingdom, Commission Coordinator Paúl Cisneros, University of
California, Davis, United States Luis Henrique Cunha, Federal
Universiy of Campina Grande (UFCG), Brazil Javier Gonzaga Valencia
Hernández, University of Caldas, Colombia Leó Heller, Research
Centre René Rachou (CPqRR), Oswaldo Cruz Foundation, Brazil Gustavo
Kohan, National University of General Sarmiento (UNGS), Argentina
Alex Latta, Wilfrid Laurier University, Canada Elma Montaña,
National Council for Scientific and Technical Research (CONICET)
Argentina Leandro del Moral Ituarte, University of Seville, Spain
Cidoval Morais de Sousa, State University of Paraíba, Brazil Jesús
Raúl Navarro García, School of Hispanic-American Studies, Higher
Council of Scientific Research (CSIC), Seville, Spain Alice Poma,
Study Group on Social Actors, Representations and Political
Practices, School of Hispanic-American Studies, United Kingdom,
Higher Council of Scientific Research (CSIC), Seville, Spain.
Antonio Rodriguez Sanchez, Jose Luis Maria Mora Institute, Mexico
City, Mexico Erik Swyngedouw, Manchester University, United Kingdom
María Luisa Torregrosa, Latin American Faculty of Social Sciences
(FLACSO), Mexico Norma Valencio, University of Sao Paulo,
Brazil
WATERLAT-GOBACIT Working Papers General editor: José Esteban
Castro 5th Floor Claremont Bridge Building, Newcastle University
NE1 7RU Newcastle upon Tyne, United Kingdom E-mail:
[email protected]
mailto:[email protected]://www.waterlat.org/
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WATERLAT-GOBACIT Network Working Papers Research Projects Series
SPIPRW – PRINWASS Project – Vol. 3 No 2 Castro, José Esteban
_____________________________________________________________________________
WATERLAT-GOBACIT Research Network
5th Floor Claremont Bridge Building, NE1 7RU Newcastle upon
Tyne, United Kingdom E-mail: [email protected] – Web page:
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Pageiv
An examination of the politics of privatization of water and
sanitation services in Africa, Europe, and Latin America
(1990-2004) Keywords Privatization; water and sanitation services;
neoliberal politics; Africa, Europe, Latin America
Corresponding Author: José Esteban Castro 5th Floor Claremont
Bridge Building, Newcastle University NE1 7RU Newcastle upon Tyne,
United Kingdom E-mail: [email protected]
The WATERLAT-GOBACIT Network Working Papers are evaluated in
general terms and are work in progress. Therefore, the contents may
be updated during the elaboration process. For any comments or
queries regarding the contents of this Working Paper, please
contact the Corresponding Editor.
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WATERLAT-GOBACIT Network Working Papers Research Projects Series
SPIPRW – PRINWASS Project – Vol. 3 No 2 Castro, José Esteban
_____________________________________________________________________________
WATERLAT-GOBACIT Research Network
5th Floor Claremont Bridge Building, NE1 7RU Newcastle upon
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Pagev
Table of Contents
Page Presentation of the SPIPRW Series and the Working Paper
1
Acronyms List of Text Boxes List of Charts List of Figures List
of Tables
3 5 5 5
6
Barriers to and conditions for the involvement of private
capital and enterprise in water supply and sanitation in Latin
America and Africa: Seeking economic, social, and environmental
sustainability. Final Project Report José Esteban Castro, Newcastle
University Introduction 7 The research problem, questions, and
objectives 8 The research structure 14 Main research findings 25
Conclusions 81 Appendix 85 References 104
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Page1
Presentation of the SPIPRW Series and the Working Paper We are
glad to present the fourth Working Paper of the PRINWASS Project
Series (SPIPRW). The SPIPRW Series has the objective of making
available the final reports of the PRINWASS Project. This project
was carried out between 2001 and 2004 and was funded by the
European Union’s Fifth Framework Programme. PRINWASS is a major
landmark for our network, as WATERLAT-GOBACIT was created by a
group of PRINWASS partners after the project ended to continue
working together on the politics of water and water services.
Although some time has passed since the project ended, the
topics addressed and the project’s findings have significant
relevance and can contribute towards better understanding some of
the challenges currently facing the implementation of progressive,
egalitarian water politics. In short, PRINWASS’ main objective was
to examine critically the policies of privatization of water and
sanitation services implemented worldwide during the 1990s, looking
at specific cases from Africa, Europe and Latin America. The
project carried out case studies in Argentina, Bolivia, Brazil,
England and Wales, Finland, Greece, Kenya, Mexico, and Tanzania,
and developed comparative analyses of the main findings. Although
the reports were freely available by request, and we produced a
number of specific publications based on the project’s findings,
much of the material remains largely unknown and, for this reason,
we launched the SPIPRW Series to facilitate their
dissemination.
This Working Paper presents the Final Report that provides an
overview of the PRINWASS Project and a summary of main findings.
The original report was written in 2004, and therefore sometimes
contains references that may be outdated. We decided to keep the
original text, and only edited it to adapt the formatting and to
make some corrections. We hope that the readers will find this
material useful and that it can contribute to the work of our
researchers, students, activists, and others in their activities to
understand better the internal workings and the huge impacts of
water privatization processes. These policies are not only very
much alive, but are also experiencing a worldwide revival.
Therefore, we believe that the findings and lessons that emerged
from the PRINWASS Project deserve this publication effort. We wish
you all a pleasant and fruitful reading.
José Esteban Castro
Newcastle upon Tyne, June 2016
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_____________________________________________________________________________
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Page2
Original report cover published in August 2004
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Page3
Acronyms AASA Aguas Argentinas (Buenos Aires water utility,
Argentina) ASSEMAE National Association of Municipal Water and
Sanitation Services (Brazil) BOT Build-Operate-Transfer BOO
Build-Operate-Own CAASA Aguascalientes Water Company S. A. (Mexico)
CAN National Water Commission (Mexico) COMPESA Pernambuco’s Water
and Sanitation Company (Brazil) D1-Dn I refer to the different
project reports (“deliverables” in the jargon of EC-
funded research) as documents D1, D2, D3 …Dn. I list them in the
bibliography under the name of the document’s main author or
co-ordinator, as it may correspond. When a reference is made in the
text, I provide both the acronym and the author’s reference: D2
(Seppälä, 2002). A full list of the project’s deliverables can be
consulted in the project’s web site: http://www.prinwass.org.
DMAE Municipal Department of Water and Sanitation (Porto Alegre,
Brazil) ECLAC UN Economic Commission for Latin America and the
Caribbean EMASESA Seville’s Municipal Company for Water and
Sanitation Services (Spain) ENOHSA National Entity for Water and
Sanitation Works (Argentina) EPAL Portuguese Public Water Company
ESA External Support Agency ETOSS Tripartite Entity of Sanitation
Works and Services (Argentina) EYDAP Athens Water Supply and
Sewerage Inc. (Greece) GWI Global Water Intelligence GWP Global
Water Partnership HDI Human Development Index ICSID International
Centre for Settlement of Investment Disputes IDB Inter American
Development Bank IFIs International Financial Institutions IMF
International Monetary Fund INCO-DEV International Cooperation for
Development, European Commission LDCs Less Developed Countries MDGs
Millennium Development Goals NBI Unmet Basic Needs (NBI for its
Spanish acronym) NYEWASCO Nyeri Water and Sewerage Company (Kenya)
OECD Organisation for Economic Cooperation and Development OFWAT
Office of Water Services (United Kingdom) OSN Obras Sanitarias de
la Nación (Argentina) PMSS Modernization Programme for Water and
Sanitation Services (Brazil) PRONAPAC National Programme for
Potable Water and Sewerage (Argentina) PSP Private Sector
Participation RWAs Regional Water Authorities (England and Wales)
SABESP Sao Paulo State’s Water and Sanitation Company (Sao Paulo,
Brazil) SADM Water and Sanitation Services of Monterrey (Nuevo
León, Mexico) SAMEEP Water and Maintenance Provincial Company
(Chaco, Argentina)
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Page4
SEMAPA Cochabamba Municipal Service of Potable Water (Bolivia)
PT Workers’ Party (Brazil) UFW Unaccounted for Water UNDP United
Nations Development Programme USAID United States Agency for
International Development WSS Water and Sanitation Services
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Page5
List of Boxes Box 1 Direct state subsidies (some examples) Box 2
Indebtedness (some examples) Box 3 Unemployment patterns Box 4 Key
principles of neoliberal water policy List of Charts Chart 1 Water
sources used in the case studies Chart 2 Evolution of unemployment
rates in selected cases (1971-2003) List of Figures Figure 1 The
problem-centred research approach Figure 2 The project structure
Figure 3 The diversity of ownership and management schemes in the
cases Figure 4 Prevailing financial arrangements in the case
studies Figure 5 Tariff structures in a sample of cases
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Page6
List of Tables Table 1 International Investments Flows in
Developing and Transition Countries for
Water and Sanitation (1984-1997) Table 2 Top Five Developing
Countries by Total Investment in WSS (1990-97) Table 3 The selected
case studies Table 4 Case studies by population size, urban area,
and population density Table 5 Case studies by duration of the PSP
experience Table 6 Sources of funding – AASA (May 1993-December
2001) (in € and %) Table 7 Source of funding – RWE-Thames Water
(April 1999-March 2003) (in € and %) Table 8 Source of Funding –
EYDAP (Athens), 1998-2001 (in € and %) Table 9 Investment
commitments and degree of compliance (examples) Table 10 Level of
overall efficiency according to type of operator Table 11 Evolution
of public support for PSP in Latin America (1998-2003) Appendix A2
Table A1 Investment obligations and actual achievements in a
selected group of cases Table A2 Characteristics of the tariff
structures (examples) Table A3 Sequence of policy reforms and PSP
events in the case studies
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Page7
Barriers to and conditions for the involvement of private
capital and enterprise in water supply and sanitation in Latin
America and Africa: Seeking economic, social, and environmental
sustainability. Final Project Report José Esteban Castro, Project
Co-ordinator1 Newcastle University, United Kingdom Introduction2
This reports presents an overview of the original project goals,
objectives, and research plan, and discusses the characteristics of
the work done and the main findings. It is based on the whole range
of reports produced during the project life, in particular the 10
full case study-reports,3 1 complementary case study report,4 6
cross-comparative reports covering the key analytical dimensions of
the project,5 and the 9 country strategic reports.6 Section 1
reviews the research problem, questions and objectives that we set
up in the original proposal. Section 2 briefly explains the
structure of the research, its main analytical dimensions and
phases, and the chosen methodological approach, including an
overall description of the group of case studies. Section 3
presents the main findings according to the objectives proposed and
looking at the economic-financial trends, infrastructure and
environmental aspects, socio-economic and demo-geographic
structures and processes, and socio-political factors. Section 4
provides a synthesis of the main conclusions. An Appendix offers
some additional
1 E-mail: [email protected]. 2 We have avoided
unnecessary referencing throughout the report to make the text more
readable, although for specific pieces of information or analysis
we have provided the relevant references for easy consultation.
Apart from these cases, all the information on which this report is
based has been extracted from the PRINWASS case study reports,
strategic country reports, and cross-comparative reports, which are
listed by author in alphabetic order in the Reference List. 3
Azpiazu et. al. (2003), Castro (2003), Crenzel (2003), Kallis and
Coccossis (2003), Crespo et. al. (2003), Mashauri (2003), Nyangeri
(2003), Seppälä et. al. (2003), Torregrosa et. al. (2003), and
Vargas (2003). 4 Roze (2003). 5 Azpiazu and Schorr (2004), Castro
(2004b), Crenzel and Forte (2004), Kallis and Coccossis (2004),
Torregrosa et. al. (2004), and Vargas and Seppälä (2004). 6 Azpiazu
et. al. (2004), Castro (2004a), Laurie et. al. (2004), Kallis and
Coccossis (2004b), Mashauri (2004), Nyangeri (2004), Seppälä
(2004), Torregrosa and Kloster (2004), and Vargas (2004).
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Page8
information, but for a full account of the arguments and
evidence the reader should look at the relevant base reports (see
Reference List).
In the strategic country reports we have incorporated a
reference to the most likely trajectories that WSS may follow
during the next decade, which aims at providing insights and
reference points for policy design and implementation in the field.
We have also included policy recommendations in these reports and
also in the cross-comparative studies. We aim at developing
abridged versions of the recommendations in the form of policy
briefs and other dissemination instruments, which will be available
through the project’s web site: http://www.prinwass.org.
1. The research problem, questions, and objectives Our research
problem has been centred on the continued failure to provide
essential water and sanitation services in less developed countries
(LDCs). The figures are well known: 1.1 billion people worldwide
have no access to safe drinking water, 2.4 billion people lack
basic sanitation, and 5 million people die each year from
preventable water-related infections, while millions are affected
by long-term illnesses caused by the intake of health-threatening
substances naturally present in water such as sulphates, arsenic,
or manganese. Preventable diarrhoeal diseases alone kill about 2
million people every year, most of whom are children under 5 years
of age living in peri-urban and rural areas of LDCs under
conditions of extreme poverty. An estimated 6,000 children die each
day from preventable water-related diseases.
In our perspective, as stated in the original project
proposal,
The reasons for the lack of access to water and sanitation
services affecting a large share of the world population are not
only technical, but also socio-economic, organisational,
institutional, political and cultural. In the developing world, the
problem is more often caused by policy and institutional failure,
rather than by technical failure (PRINWASS, 2000: 3).
Within this overall framework we decided to focus on the main
efforts being
implemented by the international community in order to tackle
the problem. In this regard, our research target has been the
mainstream water and sanitation (WSS) policies implemented in the
sector since the 1980s, which have promoted the expansion of
private sector participation (PSP), especially that of
multinational private water monopolies, as the key strategy to
solve the situation in developing countries. According to
information available at the time when we developed the research
proposal, investment flows and the number of contracts involving
PSP in the provision of WSS in developing countries had
significantly increased since 1990 (Table 1).
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Page9
Table 1. International Investments Flows in Developing and
Transition Countries for Water and Sanitation (1984-1997) Year
Number of contracts Increase (% ) Value (€ million) Increase (% )
____________________________________________________________________________________
All Developing Countries 1984-90 8 300 1990-97 97 1,137% 25,000
7,900% Breakdown by region (1990-97) East Asia 30 12,000 Eastern
Europe/Central Asia 15 1,500 Latin America/ Caribbean 40 8,300
Middle East/North Africa 4 3,300 Sub-Saharan Africa 8 37
____________________________________________________________________________________
Source: Elaborated from DFID (2000).
This expansion of PSP reflected policy decisions in developed
countries about
how investment, aid, and loans to developing countries should be
directed. It was based on the diagnosis made in the mainstream
literature that the public sector had failed to deliver an
efficiently managed universal provision of essential WSS –an
empirical question–, and that the main reason for this failure is
that the public sector is inherently inefficient to produce and
distribute goods and services –a theoretical and ideological
assumption. This assumption was complemented in the literature with
the assertion that the private sector is inherently superior and
more efficient than the public, on the basis of which a number of
claims were derived that provided the main rationale for the
policies being implemented in the WSS sector worldwide. Our main
interest was precisely to explore and evaluate the validity of
these claims regarding the expected impact of PSP in the water and
sanitation sector of LDCs.
As identified in the original project proposal, mainstream WSS
policies claim, among other issues, that expanding PSP is the best
strategy for
o enhancing the efficiency of infrastructure services; o
extending their delivery to the poor; o relieving pressure on
public budgets by providing fresh private
investment; o improving social equity.7
7 As stated, for instance, in World Bank (1998: 1); Savedoff and
Spiller (1999); IDB (1998): 120.
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Page10
However, there were already warning signs that the policies were
not achieving
their stated objectives. For instance, as Table 1 already
suggests, there were high regional inequalities in the way in which
these efforts were directed, with a high concentration of projects
in Latin America and the Caribbean and East Asia, while other
regions such as Sub-Saharan Africa were receiving little attention.
In addition, there was also a strong concentration by country,
reflecting that the unevenness of the process was also
intra-regional, as shown in Table 2. These inequalities were also
expressed in other forms, in particular in the concentration of PSP
projects in water supply to the neglect of much needed investment
in the wastewater collection, treatment and disposal (Silva et.
al., (1998).
Table 2. Top Five Developing Countries by Total Investment in
WSS (1990-97) Country Value (€ million) Number of projects
____________________________________________________________________________________
Argentina 6,837 7 Philippines 6,435 3 Malaysia 5,362 6 Turkey 1,360
2 Mexico 660 12
____________________________________________________________________________________
Source: Elaborated from Silva et. al. (1998).
We assumed the hypothesis that these trends were indicating that
the particular
forms of private involvement been promoted by mainstream WSS
policies may be contributing to worsening regional and local
inequalities in the context of increasing market globalisation.
This hypothesis received some support from the fact that those
regions with the highest level of private investment in WSS like
Latin America had also seen their inequality gap widened during the
1990s which, “regardless of the measurement used”, made the
subcontinent the most unequal region in the world (IDB (1998). The
claim that PSP would fill the gap left by the state in extending
services to the poor and reducing social inequity was not being
matched by the emerging empirical evidence.
Also, it was evident that the expansion of PSP was not
necessarily being reflected in increased infrastructure efficiency
or in the relief of public sector debt through the increase of
genuine fresh private investment. There were already well-known
examples of private sector failure in the 1990s due to worsening
efficiency
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Page11
standards in WSS, not only in developing countries but also in
the developed world.8 Also, the level of indebtedness of some
countries, Argentina perhaps the best example, had more than
doubled during the 1990s, and the expansion of PSP seemed to be
adding to the problem. For instance, in the case of Tucumán,
Argentina, the collapse of a PSP concession in 1997 as a result of
widespread public dissatisfaction with steep price increases and
the worsening quality of the service resulted in a new financial
threat for the already burdened public sector. The private
consortium Aguas del Aconquija, led by the French water monopoly
Vivendi, sued the Argentinean government for 300 million dollars in
compensation for the cancellation of the contract (in concept of
expenses and future earnings lost over the 30 years of the original
concession). The fact that the tribunal where the case was
presented was the International Centre for Settlement of Investment
Disputes (ICSID), closely related to one of the major sponsors of
PSP, the World Bank, was casting shadows over the transparency and
justice with which the trial could be conducted.9 A similar
situation took place in the case of Cochabamba with the collapse in
March 2000 of the concession of the local water utility to
International Water, which sued the Bolivian government before the
ICSID for 30 million dollars. This case was aggravated because
Bolivia, leaving aside Haiti and Nicaragua, is the poorest country
in Latin America. In Aguascalientes, Mexico, the private operator
(led also by the French group Vivendi) had to be rescued from
bankruptcy by the public sector after the 1994 financial crisis,
which involved an undisclosed amount in concept of state subsidy
and the significant reduction of the private operator’s financial
responsibilities for investment in infrastructure. By the late
1990s the claims about the supposed higher efficiency of private
sector operators and the beneficial impact of PSP on public
finances were increasingly contested in the light of the mounting
evidence to the contrary.
Nevertheless, the debate has been marred by entrenched
ideological positions and narrow interests which obscure the
capacity of the actors involved for rational argumentation and
practical action. Contributing to the rationalization of this
debate is perhaps the most important general objective underlying
our research effort. We are not neutral in this debate –and the
team members held different opinions and positions regarding this
debate–, but have made an effort to produce objective results,
based on empirical evidence, while engaging with representatives of
all sectors involved in order to ensure a maximum degree of
exposure of our arguments to constructive criticism. In this
connection, to start exploring the claims and counterclaims around
PSP we elaborated a series of research questions, which had both an
intellectual gist as well as a practical, policy-oriented
preoccupation. We were interested in addressing the following
issues:
8 We referred at the time to the work of Lorrain et. al,.(1997);
Morgan et. al. (1996); Haughton (1996). 9 As such, to the best of
our knowledge, the case continues to be unresolved at the time this
report is being written [August 2004]. The company lost the case in
the first audience, but it appealed the decision.
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• What was the theoretical ground informing these claims and the
design and implementation of mainstream WSS policies?
• What was the historical or empirical evidence used to support
these claims and the particular policy options chosen?
• What can be learnt from the recent experiences of success and
failure in the implementation of these policies in LDCs?
• What are the critical success conditions and crucial barriers
for private participation in WSS in developing countries?
• How these factors may affect the future implementation and
development of WSS systems with private sector involvement that are
not only efficient but also socio-economic and environmentally
sustainable and democratically accountable?
In order to address these initial exploratory questions we
adopted a number of
research objectives that would orientate the research
effort:
• Assessing the theoretical foundations of the current policy
prescription for improving WSS in developing countries, focusing on
the policy-institutional, economic-financial and
socio-political/cultural aspects;
• Analysing the continuities and emerging trends in structural
approaches to improving sustainable WSS; drawing on a
cross-comparative report for the countries studied;
• Identifying the barriers to and conditions for improving WSS
in urban and peri-urban areas of developing countries (with
particular reference to legal, administrative, policy,
economic-financial, political, socio-cultural, etc. issues);
• Analysing, and assessing the significance of, the interactions
between the requirements of global financial and other institutions
and the structural contexts and the barriers to and conditions for
improvement in WSS;
• Establishing and assessing recent and current experiences of
private sector involvement in the WSS sector of the case-study
countries and provide analytical reports for each country;
• Developing an indicative framework of strategy and processes,
expressed by relevant guidelines, for sustainable WSS in developing
countries, taking into account the roles of the state (national,
regional, and local government levels), civil society (users
associations, citizen movements, etc.), and market forces
(privatised water utilities, public-private partnerships, and other
forms of private sector involvement in WSS).
The sequence leading to the identification of the claims and the
elaboration of the research questions and objectives is illustrated
in Figure 1. The diagram also shows the forward links connecting
with the actual research work consisting in the search for
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evidence, evaluation, explanation, and contributions towards the
enhancement of policy options and the expansion of knowledge.
Figure 1. The problem-centred research approach
Policy problem, redefined as research
problem
Research questions and objectives
ClaimsExisting Theory and Knowledge
New Evidence
Evaluation
Explanation
Revised Policy Options
Extended knowledge
Reformulation of policy problems
Revised claims
The original research questions and objectives were revised and
confirmed at
the Second Research Workshop that took place in Mexico City on
31 March and 1 April 2003. It was agreed then that the project’s
questions and objectives remained valid despite the significant
developments that had taken place since the PRINWASS research
proposal was conceived in 1999-2000, in particular the adoption of
the Millennium Development Goals (MDGs) for 2015/2025, and the
changing role and strategies of the private water multinationals
since 2002. We come back to these issues later.
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2. The research structure The research work was structured
around case studies and was divided into three phases, as
illustrated in Figure 2. The first phase was aimed at elaborating
the initial analytical framework to be applied in the case studies,
in particular for the three central dimensions of the study: the
policy-institutional, economic-financial, and socio-political and
cultural. In this phase we also developed a provisional
operationalization of these dimensions, through the identification
of the main sub-dimensions and indicators for collecting
information in the case studies.10 The adoption of this common
framework built around six dimensions11 and their corresponding
substructures was aimed at enhancing the conditions of
comparability across the highly diverse case studies. Figure 2. The
project structure
Case Studies
Policy-institutional
Analytical Dimensions
Economic-financial
Socio-demographic
Socio-political and Cultural
Environmental
Techno-infrastructural
Cross-comparative
Analyses
First Phase Second Phase Third Phase
Strategic
Country Reports
Final Reports
10 See Appendix A1 “Operationalization of the analytical
dimensions”. 11 In the original proposal we had identified seven
dimensions but later decided that the contents of the dimension
“Water sector trends” were already subsumed under other dimensions,
especially the “Environmental”, “Policy-Institutional”, and
“Techno-infrastructural”.
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2.1. The case studies The selection of cases was oriented at
covering a wide range of experiences and conditions. From a certain
perspective, an ideal strategy could be selecting cases that are
highly homogeneous in some characteristics but with different
patterns in the results observed regarding PSP. For instance, one
could select all cases with participation of global water
multinationals, with at lest a minimum period of experience (e.g.
not considering cases with less than five years of PSP), and
looking at cities of a certain size (e.g. not less than 100
thousand inhabitants), with results of success and failure in the
implementation of PSP (measured against some concrete parameter,
for instance, degree of compliance with the contractual
obligations). However, an alternative strategy would be to select
cases with contrasting characteristics in order to elicit a richer
set of observables, which would allow exploring the impact of PSP
in the water and sanitation sector on a wider range of
situations.
Our selection of cases is closer to this second alternative, but
was also influenced by the actual possibilities of the research
partners in terms of expected access to information, personal
contacts, capacity for carrying out the field work within a
restricted budget,12 and opportunity. The latter point is very
important because our object is a mobile target: concessions are
negotiated, granted, renegotiated, and cancelled some times in a
matter of months. Therefore we adopted a flexible approach at the
beginning of the project before finally deciding which cases would
be selected. Another crucial factor was that selection of cases was
also influenced by the existing relationships between the research
partners, as we preferred to choose cases that were already
familiar to the partners, not venturing into unknown situations for
which we could be unprepared given the many constraints facing the
team.
Nevertheless, in the original proposal we had identified most of
the cases where the studies would be finally carried out. However,
we allowed individual partners to re-examine the original selection
of cases in the light of new developments and information, which
led to a few changes in the original set of cases. In Argentina,
for example, the peculiar conditions of the local partners allowed
them to provide two full reports rather than one as originally
planned, covering the cases of Buenos Aires (Aguas Argentinas) and
Tucumán, the capital of the namesake province, separately. In
addition, we had a complementary report covering some dimensions of
the research for the case of Resistencia, capital of the
North-eastern province of Chaco. In other cases, like Kenya and
Tanzania, the local researchers were able to further specify the
case studies originally targeted. In Kenya, the final decision was
to look at the case of Nyeri municipality in the Central Province,
the most advanced in terms of economic and human development, and
Tala Town in the Eastern Province, one of the most disadvantaged.
In Tanzania, the decision was to change the original location of
Zanzibar for Dar es Salaam, where after several years of cumbersome
negotiations a private concession was taking off in 2001-2 and was
finally granted in 2003. In Brazil,
12 The original budget asked was reduced by 25 percent once the
project was approved for funding. Although we did not change our
task plan, we needed to plan the field work with even greater
economy than already envisaged in the project proposal.
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the local partner decided to keep the cases of Limeira (Sao
Paulo) and Niterói (Rio de Janeiro), but replaced the original
locations of Santo André and Diadema (Sao Paulo) by the Lakes
Region in Rio de Janeiro as the opportunity emerged to examine the
original case of an inter-municipal body given in concession to a
consortium headed by a European public company acting as a private
operator. Finally, in Mexico the decision was to concentrate the
study on the city of Aguascalientes, capital of the state of
Aguascalientes, most particularly because this was the first full
concession of WSS to a private operator in Mexico and was
considered by the authorities to be a pilot case for the expansion
of PSP in the country. Table 3 presents the final selection of
cases.
Table 3. The selected case studies
REGION/ COUNTRY
CASE POPULATION WSS OPERATOR13 PERIOD OF OPERATION
AFRICA
Kenya
Nyeri 120,540 NYEWASCO, corporate14 municipally
owned
1998 to date
Tala 22,375 Romane Agencies Ltd., private
1999 to date
Tanzania Dar es Salaam 2,497,940 City Water Services Ltd.,
private, (Biwater Plc /
JBG Gauff Ingenieure)
2003 to date
EUROPE England Thames River
basin 12,493,000 RWE-Thames Water,
private 1989 to date
Greece Athens 3,187,734 EYDAP, mixed entity controlled by the
state15
As a mixed entity since 1999 to date
Finland
Lahti 98,000 LV Lahti Water Ltd. Over 30 years Lappavesi16
36,000 Lappavesi Ltd. and
Lapua Sewerage Ltd., municipal
1972 to date
Kangasala 23,000 Kangasala Municipality Water and Sewerage
Ltd
1950s to date
13 Name of the operator (acronyms explained in list at the
beginning)), type (public, private or mixed), and leading partner
(for multinational consortia). 14 NYEWASCO is owned by Nyeri
Municipal Council but is run by a Corporate Management Team on the
basis of private sector operation and management models. It is part
of a Pilot Project to reorganize Kenyan municipal WSS around
commercial principles, in preparation to be eventually granted in
concession to the private sector. 15 The company floated 39 percent
of its shares, which are owned by private investors. 16 Includes
the municipalities of Lapua (population 13,000), Nurmo (population
11,000), Kauhava (population 8,000), and Kuortane (population
4,000).
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Table 3. Case studies (continued) REGION/ COUNTRY
CASE POPULATION WSS OPERATOR PERIOD OF OPERATION
LATIN AMERICA
Argentina
Buenos Aires 11,453,725 AASA, private (Suez - Ondeo)
1993 to date
Tucumán 697.936 ENOHSA, provincial operator17
1998 to date
Resistencia (Chaco)
365,637 SAMEEP, provincial operator
1980 to date
Bolivia Cochabamba 517,024 SEMAPA, municipal operator18
1967 to date
Brazil
Niterói (Rio de Janeiro)
459,451 Águas de Niterói, private
1999 to date
Lakes Region 19 (Rio de Janeiro)
403,418 PROLAGOS, private (EPAL)
1998 to date
Limeira (Sao Paulo)
249,046 Aguas de Limeira (Suez, Ondeo)
1995 to date
Mexico Aguascalientes 643,419 CAASA, private (Vivendi -
Veolia)
1993 to date
As it can be noticed, the variation between cases is high in
several respects.
Firstly, it is important to explain that although the project
focused on PSP participation, we also considered some cases of
public sector ownership and management. In some cases, like
Finland, although all water utilities are in public hands, mainly
municipalities, and cooperatives, the private sector has
historically played a very active role but in a different capacity
to the one promoted in mainstream WSS policies. Nevertheless, the
private sector takes up to 80 percent of the revenue generated by
the utilities, which illustrates the relevance of this model for
the research. In other cases, like Athens, the public sector
company has floated part of its shares (39 percent) which are now
in private hands, providing another model of PSP worth exploring.
In Nyeri, Kenya, the water utility is still public but being
prepared to be eventually granted in concession to the private
sector, which provides insights into the dynamic of the PSP
17 This is one of two cases of failed PSP concession. In 1995
WSS were granted in concession to Aguas del Aconquija, a consortium
led by the French group Vivendi, but the contract was cancelled in
1997 and the company was taken over by the public sector. 18 This
is the second failed PSP concession. The city’s WSS were granted in
concession to Aguas del Tunari, a consortium led by International
Water (controlled by the American company Bechtel), in 1999, but
the concession contract was cancelled in April 2000 and the company
was taken over by the municipality. 19 Includes the municipalities
of Arauama, Saquarema, Silva Jardim, Armação dos Búzios, Arraial do
Cabo, Cabo Frío, Iguaba Grande and S. Pedro da Aldeia.
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process before it is openly launched. In Tucumán and Cochabamba
we have public companies that had to take back the WSS after the
collapse of the private concessions in both cases. Figure 3
provides a schematic description of this diversity of the cases
with regard to ownership and management.
Figure 3. The diversity of ownership and management schemes in
the cases
Secondly, the variation is also high when we consider the
population size and
the scale of the areas served by the different operators,
ranging from small towns of between 4 thousand and slightly over 20
thousand people in Finland and Kenya to huge populations like in
the Thames River basin totalling around 12.5 million people or
Buenos Aires with just under 11.5 million people –around one third
of the country’s population. The water utilities examined are
serving urban areas that range from 21 square kilometres in Nyeri
to almost 3 thousand square kilometres in the Lakes Region of Rio
de Janeiro, with population densities that go from 9.5 persons per
square kilometre in Kuortane, Finland, to 13.7 thousand people per
square kilometre in Buenos Aires (Federal Capital). These factors
have an obviously crucial importance for the provision of WSS and
need to be kept in mind during the presentation of the main results
of the research to minimize distortion. Table 4 presents the cases
according to population size, urban area, and population density.
We consider some of these issues later on.
Public ownership and management
Thames River basin
les
Cochabamba Tucumán Lahti Kangasala Lappavesi and Lapua
Aguascalientes Buenos Aires
Limeira Niterói
Lakes Region Tala Town
Dar es Salaam Athens Nyeri
Private ownership and management
Public ownership, private concession
Public ownership, in preparation for eventual concession to the
private sector
Mixed ownership, and management
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Table 4. Case studies by population size, urban area, and
population density CASE POPULATION URBAN AREA
(square km) POPULATION
DENSITY (population/sq. km)
Thames River basin London
12,493,000
7,188,000
1,590.00
4,480.0
Buenos Aires 11,453,725 202.9 13,679.6 Athens 3,187.734 456.7
6,979.0 Dar es Salaam 2,497,940 1350.0 1850.0 Tucumán 697,936 90.0
5,862.3 Aguascalientes 643,419 86.3 68.9 Cochabamba 517,024 55.6
3,713.0 Niterói 459,451 134.5 3,507.0 Lakes Region 403, 418 2,957.9
136.4 Limeira 249,046 579.0 430.0 Nyeri 120,540 20.8 721.0 Lahti
98,000 134.98* 726.0 Kangasala 23,000 353.85* 65.0 Tala 22,375 33.7
721.0 Lapua 13,000 75.0 18.6 Nurmo 11,000 36.2 31.3 Kauhava 8,000
48.5 16.8 Kuortane 4,000 46.2 9.5
* Estimated
Thirdly, the hydrological and other physical-natural conditions
affecting the
provision of WSS are also highly variable across the cases, and
these are crucial factors determining, for instance, different
levels of investment for the energy inputs and conveyance
structures needed for water abstraction, treatment, and
distribution, which differ substantially between cities like
Aguascalientes, London, or Buenos Aires. Likewise, pollution
problems are very different in locations dependent on surface water
than those relying more or completely on underground aquifers.
Chart 1 shows just one of the aspects, the type of water sources on
which the cases are dependent, to illustrate this variability.
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Chart 1. Water sources used in the case studies
* In London the proportion of surface water used is higher than
the basin’s average.
Source: Torregrosa et. al. (2004).
Finally, there are other elements that also impinge on the
comparability of the
cases, some of which are addressed in the presentation of the
main results, but there is one more important aspect that is worth
highlighting here: the temporal scale of the PSP experience in the
cases studied. In this regard, a tentative classification is to
cluster the cases20 into four groups: “mature” PSP cases, with over
10 years of experience, intermediate cases from 5-10 years of PSP
experience, incipient cases below 5 years of PSP experience, and
failed cases. Table 5 shows the cases grouped according to their
PSP experience in a temporal scale.
20 We did not include here the Finnish cases.
Intake
0% 20% 40% 60% 80% 100%
UK (Thames River Basin)*
UK (London)*
ARGENTINA (Buenos Aires)
TANZANIA (Dar es Salaam)
BOLIVIA (Cochabamba)
GREECE (Athens)
ARGENTINA (Tucumán)
BRAZIL (Niterói)
BRAZIL (Limeira)
KENYA (Nyeri)
MEXICO (Aguascalientes)
FINLAND (Lahti)
KENYA (Tala)
FINLAND (Kangasala)
% of underground / surface water
undergroundsurface
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Table 5. Case studies by duration of the PSP experience TEMPORAL
SCALE OF PSP
CASE START DATE NUMBER OF YEARS
Mature
Thames River basin 1989 15
Buenos Aires 1993 11
Aguascalientes 1993 11
Intermediate
Limeira 1995 9
Lakes Region 1998 6
Nyeri 1998 6
Athens 1999 5
Tala 1999 5
Niterói 1999 5
Incipient Dar es Salaam 2003 1
Failed
Tucumán 1995-97 2
Cochabamba 1999-2000 Less than 1
This information is crucial and must be kept in mind when
reading the main
results summarised in this report to avoid a misinterpretation
of the conclusions. Many of the processes involved in the provision
of WSS have to be considered in the context of their middle- to
long-term lifecycles, such as the investment in maintenance,
renewal and expansion (or decay) of WSS infrastructure, the
environmental impact of rising volumes of raw water abstractions
and unsafe disposal of untreated wastewater, or the influence of
deindustrialization processes on the dynamics, levels, and quality
of groundwater. This makes difficult sometimes to clearly allocate
responsibilities to the different actors (e.g. public or private)
with regard for instance to the evaluation of achievements or
failures. In some cases, as shown later, promoters of PSP and
private operators have praised themselves for achievements that had
actually been the result of longer-term processes (certainly longer
than their period in charge of the concession) made possible by
others, whether be the public sector, for instance in the
universalization of drinking water and sanitation in Limeira, the
cleaning of the Thames River in England, or by a convergence of
multiple factors underscoring the fall of infant mortality rates in
Argentina which, understandably, also fell in areas that have been
given in concession to a private operator.
Undoubtedly, even the most objective evaluation of such a
sensitive topic as the expansion of PSP in the water and sanitation
sector of developing countries is bound to be controversial for
many reasons, but keeping these caveats in mind will contribute to
make the conditions for detached analysis more feasible.
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2. 2. Complexity and interdisciplinarity The above
considerations about the sheer scope of the case studies and the
caveats that need to considered while looking at the results did
not take us by surprise. The team was aware from the start that
this was a very ambitious project and that we may face significant
obstacles to develop all the planned tasks with the same level of
detail and precision in all our cases and across all the different
project phases. As stated in the original project proposal,
We are well aware that understanding and explaining the complex
situations characterising the problem addressed in this research
require a degree of sophistication and comprehensiveness, which is
impossible to achieve in a single project. If, in addition to that,
the aim is to provide policy options and scenarios for facilitating
effective action leading to the correction of the problem, the
obstacles and impediments assume gigantic proportions. […] Another
obstacle may be the availability, reliability and comparability of
data, especially concerning the coverage and quality standards of
WSS across the different countries (PRINWASS, 2000: 28).
In spite of these challenges, we assumed that the effort was
worth doing because
the project was aiming at breaking ground on important issues,
in particular in the search for what we later called “meaningful
interdisciplinarity” in water sector research.21 The objective was
to move beyond paying lip service to the need of more
interdisciplinary work and venturing into the largely uncharted
terrain where social scientists, engineers, physical geographers,
and business experts, among others,22 can work together on the
assumption that disciplinary boundaries have been suspended at
least for a short while. This is a risky business for everyone
involved, especially if to the challenge posed by
interdisciplinarity we add the interaction with practitioners,
private businesses, NGOs, politicians, public servants, workers
unions, users, and
21 This was the topic of our First International Conference:
“Meaningful Interdisciplinarity: Challenges and Opportunities for
Water Research”, which took place at the University of in Oxford on
24-25 April 2002 (http://www.prinwass.org/Conference_Apr02.shtml).
The presentations for this conference are also available online:
http://www.prinwass.org/docs_April02Conf.shtml. 22 Our core team is
composed by civil engineers (Tampere University of Technology,
Finland; Dar es Salaam University, Tanzania; Nairobi University,
Kenya), environmental planners (University of the Agean, Greece),
geographers (Newcastle University, UK), economists (Latin American
Faculty of Social Sciences, Argentina; Higher University of San
Simon, Bolivia), social anthropologists (National University of the
Northeast, Argentina), sociologists (Higher University of San
Simon, Bolivia; Federal University of Sao Carlos, Brazil; Latin
American Faculty of Social Sciences, Mexico; University of Lisbon,
Portugal; National University of Buenos Aires and National
University of General Sarmiento, Argentina; Oxford University), and
urban planners (National University of General Sarmiento,
Argentina).
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Page23
community organizations to just mention the main categories of
actors that we engaged in the study.23
2. 3. Methodology
In the original proposal, we presented our approach as an
exercise to examine the claims made in the mainstream WSS
literature about the superiority of PSP over public sector
ownership and management in a number of areas, in particular
efficiency of infrastructure, provision of private investment,
expansion of coverage to the poor, and enhancement of social
equity, as already discussed earlier. For the sake of clarity we
presented the exercise in the following terms:
one of the predominant claims in the field is that private
involvement, to put it shortly, improves the efficiency of WSS. If
we take this claim as valid, then we would expect that in the
context of an N number of cases the distribution should look like
in Figure 2, that is, the largest number of cases represented by N
should be concentrated in the bottom right cell, while the
remaining categories should have a very low number of cases or no
cases at all. That would be indicating that a “high” degree of
private involvement is strongly correlated with an also “high”
level of efficiency in the delivery of WSS.
Figure 2. Claimed relation between Private Involvement
and Efficiency Level in WSS
Similar diagrams could be developed for the other claims being
investigated, such as that private involvement extends the delivery
of WSS to the poor, relieves public budgets, or improves social
equity
23 In the course of the research work we established some
permanent links with many of these actors, which we list in our web
site as “Associated Institutions”
(http://www.prinwass.org/associated_institutions.shtml).
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(developed in Section B 4). […] The expected result of our
exercise should demonstrate not only that the correlation in Figure
2 has been much weaker than the predictions of the model have
suggested, but also provide clues for understanding how and why
this happens (PRINWASS, 2000: 18-9).
As it could be expected from the previous discussion, we did not
pretend to be able to provide a rigorous quantitative assessment
but this scheme provided a logical framework to organize the
exploration, analysis, and evaluation of the particular claims. As
already noted, to this purpose we operationalized the main
analytical dimensions and identified the key subdimensions and
indicators to gather the relevant information for analysis.
However, a truly quantitative analysis could only be developed for
some dimensions, such as the economic-financial or the
socio-economic and demo-geographic, whereby we could expect to have
access to data series amenable to quantitative methodologies. To a
lesser extent, we could have expected to have quantitative data for
the techno-infrastructural and the environmental dimensions. The
other two crucial dimensions, the policy-institutional and the
socio-political and cultural, were mainly focused on qualitative
aspects, although obviously some quantitative treatment is always
possible for some aspects (e.g. the impact of disconnection
policies measured by the number of disconnected households, or
civil disobedience fuelled by PSP expansion expressed in the
proportion of unpaid water bills).
As it happened, crucial quantitative information was not readily
available for a large number of cases, and for instance in the
economic-financial dimension we could only complete some series in
three cases: the Thames River basin, Buenos Aires, and Athens. In
most other cases different obstacles made it impossible to access
basic information for the whole concession period, such as the text
of concession contracts, financial plans of the private operators,
or disaggregated data for infrastructure improvements (e.g. to
distinguish between improvements in physical and commercial
losses).24 Nevertheless, we had been aware of the potential
difficulties in accessing sensitive information, a stated in the
original proposal:
Some authors have even argued that privatisation, coupled with
the dismantling of the public sector, has prompted an institutional
crisis due to the withdrawal of crucial information (e.g. on
hydraulic management) that was previously in the public domain and
has become the property of private corporations [Dourojeanni, 1999]
(PRINWASS, 2000: 13).
This is in fact confirmed by our research, and the lack of
information and
transparency on crucial aspects of WSS management constitutes
one of the most
24 For instance, in the cases of Brazil and Mexico this kind of
information is not in the public domain and access to it depends on
the willingness of the private operators to provide it. For
different reasons our researchers did not gain access to this vital
material.
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Page25
important obstacles to the democratic governance of water
resources and WSS and, consequently, to the social and political
sustainability of these processes. Despite these obstacles, we were
able to gather solid information about most aspects covered in the
research for at least a minimum number of examples, which allowed
us to build the comparative analysis for each analytical dimension
on the basis of a core group of case studies. These issues, and the
particular methodologies employed, are explained in the individual
cross-comparative studies on which this report is based.25 3. Main
research findings Our starting research questions were related to
the theories and existing evidence informing the policies being
examined. Although much of the debate has been centred on WSS
reform, it is worth highlighting that expanding PSP in the control
and even ownership of water resources has also become a major
policy target, even when the two aspects are not always clearly
related in the PSP projects for water and sanitation. In fact,
according to some experts, in water sector reforms “the most
significant act of privatisation may be the granting of property
rights over water” (Lee, 1999: 93). As discussed later, this aspect
has far-reaching implications, both at the theoretical and
practical level, given that the actual process involves a radical
change in the status of water resources from “public” to “private”
good. In this regard, we decided to explore what were the
theoretical ground and the historical or empirical evidence to
support these claims about the superiority of PSP for improving
water and sanitation services. To this purpose we focused our first
research objective on “assessing the theoretical foundations of the
current policy prescription for improving WSS in developing
countries, focusing on the policy-institutional, economic-financial
and socio-political/cultural aspects” (PRINWASS, 2000: 3).
In this connection, the specialized literature suggests an
increasing consensus about the fact that the PSP policies
implemented in the WSS sector since the 1980s have not been based
on a coherent theoretical structure. Although they have often been
presented as the logical result of the application of rigorous
economic theory, they have actually been derived from different
bodies of thought ranging from free-market liberalism to management
theory, including neo-classical price theory, public choice, and
property rights theory. Thus, although the central argument behind
the process of de- and re-regulation, liberalization and PSP
expansion that has dominated the global agenda since the 1980s
derives from the neo-classical economics paradigm of competitive
markets (Roemer and Radelet, 1991), the fact that economic theory
“fails to provide any conclusive reason for favouring private over
public enterprise” (Commander and Killick, 1988: 320) has led
pro-PSP thinkers to introduce arguments derived from the public
choice and property rights schools in order to assert the 25
Azpiazu and Schorr (2004), Crenzel and Forte (2004), Torregrosa et.
al. (2004), Kallis and Coccossis (2004), Vargas and Seppälä (2003),
and Castro (2004b).
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Page26
superiority of the private sector over the public (Nellis and
Kikeri, 1989: 663). Moreover, these authors have also argued that
expanding PSP would help not just tackling inefficiency and
public-sector failure but also expanding “economic development and
democracy in developing countries” (Dinavo, 1995: 2). However, the
evidence shows that these claims are based on an ideological set of
principles, derived from the Anglo-Saxon tradition of free-market
capitalism, but not on a sound theoretical framework that is
internally coherent and that has been empirically tested.
This connects with our second question aimed at placing the
debate about PSP in historical perspective. In the mainstream
literature reference to the switch from private to public provision
of infrastructure and services that took place since the late
nineteenth and early twentieth centuries is seldom explored ─let
alone explained. Moreover, there is no mention to the fact that
activities like wastewater conveyance and disposal became the
exclusive responsibility of public authorities, as the private
companies were not attracted to invest in dirty water. For example,
in the World Development Report 2004 there is a text box to account
for “private participation in history” referring to WSS, whereby
unregulated PSP in nineteenth century London is uncritically and
over optimistically portrayed as a success story that would have
led to the universalization of the services. Apart from the
historical mistakes incurred in the brief note, nothing is said
about the reasons why the services had to be placed under public
control in 1902, after decades of political confrontation, or about
the fact that when the decision was finally taken there was
widespread consensus, including from defenders of free-market
liberalism, that WSS have to be in public hands. Moreover, and also
uncritically, the note adds that in the 1980s WSS were again
privatized in England and Wales, without any reference to what has
happened since, conveying the message that somehow things have
returned to normality.26 This distortion of the historical evidence
is not uncommon in the pro PSP literature. For instance, in a
co-authored article published by the pro-privatization think tank
CATO, the World Bank Private Sector Specialist Penelope Brook Cowen
has also praised the nineteenth-century unregulated private water
monopolies in England without any critical reference to the actual
historical record. Moreover, she has argued in favour of the
benefits of “unregulated privatization”, “unregulated private
monopolies”, and “laissez faire” where “the provision of services
is regulated by market forces and economic incentives” to solve the
situation of water services in developing countries today. The
argument follows
Complete privatization of water assets and unregulated natural
monopoly. […] The rationale for unregulated privatization is
straightforward. An unregulated private monopoly would have an
incentive to bring as many potential buyers into the system as
possible, so as to maximize profit. Unregulated private monopolies
could thus significantly increase the number of water connections
in developing countries. If unregulated privatization could produce
hook-ups for
26 World Bank, 2003: 167. The note also makes similar claims
about the history of WSS in other countries, including the US.
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Page27
currently neglected low-income customers, the poor would end up
with higher real incomes, better water service, more time for other
endeavours, and a greater probability of a long life (Brook Cowen
and Cowen, 1998: 22-3, 28).
Leaving aside for the moment the feasibility and desirability of
establishing
unregulated private water monopolies in developing countries,
let us say that the opposition to these policies in
nineteenth-century England and elsewhere is often described by
these authors as a kind of public-sector conspiracy or as an
anti-market, anti-liberal or even anti-democratic development.
However, the second part of the nineteenth century in London was
characterized by ongoing political debates, which led first to the
attempt to regulate the operation of private operators in order to
ensure minimum standards of quality and affordability and expansion
of the services to the rapidly growing population. The failure of
early regulation to improve the situation led to the
municipalization of public services (Taylor, 1999; Hassan, 1998;
Laski et. al., 1935; Millward, 1991) and eventually to the
amalgamation of the unregulated private water monopolies under the
control of a joint board of local authorities in 1902 (Metropolitan
Water Board, 1949). In fact, by the late nineteenth century it was
accepted ―across the political spectrum― that the achievement of
social equity (in relation to the access to and affordability of
safe water services) could not be left to the unregulated working
of the market forces, and rather the provision of safe water
services became widely conceived as a societal moral duty. The
cholera outbreaks of mid-nineteenth century triggered the
assumption that ensuring access to clean water and safe disposal of
excreta for every household —at least in urban areas— was a binding
moral duty for the community, and the Public Health Acts
established that dwellings lacking safe water supply were unfit for
human habitation (Luckin, 1986; Ward, 1997; Mukhopadhyay, 1975;
Goubert, 1986.
In the Americas, the process had many similarities. In the
United States, by the mid nineteenth century private water
companies found it difficult to survive as profit-making and
self-sufficient operations been technically and economically
inefficient, characterized by their expensive tariffs and
inadequate service standards (Schultz and McShane, 1978; Ogle,
1999). These problems, together with the risk aversion shown by
private undertakers who were unwilling to invest in the expansion
and improvement of the systems, led to the takeover of most private
water companies by municipal authorities. Thus, while in 1806 about
94 per cent of water works were private by 1896 53 per cent had
already been taken over or directly built by the public sector, a
trend that was especially significant in the largest urban centres.
Regarding sewerage systems, like in Britain these were almost
exclusively a public sector endeavour and their development did not
start until the second half of the nineteenth century (Keating,
quoted in Hukka and Katko, 2002). Today, despite the expansion of
PSP projects, most water systems in the US are still in the hands
of public authorities (municipalities, counties, districts) or run
on a not-for-profit basis, subject to strict regulation, and likely
to remain so for the foreseeable future (National Research Council,
2002: 8, 38).
In Latin America, after independence from Spain and especially
since the 1840s, the development of water supply systems became
very much influenced by the models emanating from Europe and the
United States, with varying degrees and forms of public
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(mainly municipal) and private participation. The main forms of
private involvement, which became widespread since the 1880s in
most countries of the region, were the concession of the services
or the granting of building contracts to foreign private companies
for developing the systems under state control and with public
funding. Overall, by the early twentieth century privately-provided
water supply in Latin America resembled the pattern already
observed in Europe and the United States, where the services only
reached selected neighbourhoods in the most important cities and
private undertakers were reluctant or unable to meet the financial
and technical challenges posed by rapid urban growth and rising
quality standards. One important exception to this pattern was
Argentina, where water and sanitation services became a key element
of public policy since the 1880s. After a short-lived attempt to
privatize the services in Buenos Aires, the state-owned company
took control and succeeded in extending the networks to provide
full coverage in the capital by the 1930s. Overall, the national
states assumed a leading role in the expansion of water and
sanitation since the early twentieth century, a trend that was
further accentuated by the economic crisis of the 1930s. Most
private water companies were taken over by the public sector in
order to expand the services. Also, alternative forms of private
initiative (as opposed to public, whether municipal or state) such
as co-operatives, mutual associations, and not-for-profit ventures
also became important drivers for the development of public
services, water included.27
Therefore, the experience of PSP in the water and sanitation
sector needs to be analysed in the light of what some authors have
called the “historical cycle of privatization and nationalization”
(Klein and Roger, 1994: 1), characterized by the interweaving
between the expansion of public sector participation and the role
of the private sector over time. In this regard, there is
recognition that the revival of market-driven politics (Leys,
2001), and especially the expansion of PSP, since the 1970s has not
been as much the result of evidence-backed arguments as it has been
the outcome of an ideological change that replaced the state by the
market as the key driver of economic development (Lee, 1998: 51), a
process that has been associated with “a clear rightward shift in
political opinion in Europe and North America” (Commander and
Killick, 1988: 316). In fact, there is an increasing though
somewhat cautious recognition even among the key institutions
promoting PSP that the empirical evidence to back the claims is at
best ambiguous. For instance, in ongoing reviews of PSP
experiences, World Bank specialists have concluded that
“privatization is a difficult and contentious business.
Privatization programmes have taken far longer to prepare and
implement than originally envisaged. The concept’s utility is
contested by many” (Nellis and Kikeri, 1989: 670). Moreover,
privatization has become increasingly associated with negative
social and political processes and this may help to explain why
even key global players of the private sector prefer to avoid the
term altogether. As put
27 See, for instance: for Argentina: Silvestri (1996), Herz
(1979), Bordi de Ragucci (1985); Catenazzi and Kullock, 1997, and
Pirez (1994); for Mexico: Pani (1916), Suárez Cortez (1998),
Connolly (1997), Márquez M., (1994), Aboites Aguilar (1998),
Birrichaga Gardida (1997); Bennett (1997); Pérez-Rincón (2002) for
Colombia; Swyngedouw (1999), for Ecuador; Rezende and Heller
(2002), for Brazil.
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Page29
by Mr Gérard Mestrallet, President-Director of Suez, one of the
two largest global water corporations,
we believe that the privatization of water infrastructures in
developing countries is not necessary. […] The use of the term
privatization made by some authors in their models while referring
to situations where the public sector remains the final owner of
the infrastructure constitutes an abuse of the language”
(Mestrallet, 2001; our translation).
Nevertheless, the model was adopted in many developing countries
during the
1990s, when there was a rapid expansion of PSP in the water and
sanitation sector. This widespread adoption of mainstream WSS
policies has been explained as being the result of a complex set of
factors, including external pressures, policy emulation, the
expansion of neo-conservative ideologies, political pragmatism in a
time of deep economic crisis, or even political strategies directed
at changing the power balance between national socioeconomic actors
(Manzetti, 1999). From a certain perspective, expanding the
market-driven model of WSS at a global scale became a question of
militancy, as stated by one sympathetic commentator:
It is a fact that privatization of state-owned enterprises in
Sub-Saharan Africa, Asia, and Latin America will not succeed unless
the Western industrialized developed countries, international
financial institutions, such as the World Bank and the
International Monetary Fund (IMF), and other aid donors continue to
put pressure on these governments to privatize the public sector
[…]. Once the spirit of free enterprise reigns in these developing
countries through privatization, the free market economy and
democracy will emerge (Dinavo, 1995: 133).
In this regard, the “active advocacy” of the OECD governments
seems to have
been a major driver of these policies, whether through the
direct action of government departments, aid agencies, lending
policies, or through the programmes designed and implemented by
bilateral and multilateral institutions (Commander and Killick,
1988: 314). The combination of “pressure” and “persuasion”
implemented by these agencies was ingenuously described by a
pro-privatization author referring to the situation in Africa, who
suggested that
the prospects for economic development and democracy in Africa
are much greater through privatization than through state-owned
enterprises. Pressure has been “applied on developing countries by
international organizations such as the World Bank, International
Monetary Fund (IMF), and the U.S. Agency for International
Development to pursue the policy of privatization as a part of a
package of economic reforms [quoting]”. In order for the leaders of
the developing countries to see privatization as their best
alternative, they have to be trained and educated in this field
through seminars conducted by scholars and
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